Proactive Investors - Canadian Overseas Petroleum Limited (LON:COPL) warned investors that amidst its ongoing liquidity problems it is considering strategic options which include ‘some form of formal insolvency protection’.
Such options “may or may not leave value in the company's common shares”, the company said.
It comes after the company entered into a forbearance agreement with its senior credit facility lender at the end of January – that agreement expires on February 29 and the lender has told the company it will not extend the forbearance period beyond that date.
In mid-January, the company previously warned that the value of COPL's assets were unlikely to be sufficient to cover the claims of the secured and unsecured creditors, which at that time stood at $130 million, and it cautioned that it was “in a precarious financial situation relating to its liquidity”.
It subsequently raised $2.5 million of new funds, in a share placing, to give the company some time to obtain an independent technical review of the assets, including possible near-term and medium-term cash flows from various different strategies, and, it approached investment banks for further valuations and to seek further financing.
“The preliminary results of the third party technical review have not changed the company's conclusions about the value of the company's assets,” COPL today noted.
Additionally, the company today noted that amid cut-backs it has not been buying propane or butane to reinject into wells. As a result current production volumes are reduced – with daily production averaging around 1,000 barrels a day in 2024.
Current cash-flow projections now see the company fully depleting its cash reserves during the first week of March 2024, and, it said it will need additional funding to be able to continue operations beyond then.